Google dodges EU antitrust case

The European Union outlined a number of potential antitrust concerns with Google’s business practices on Monday, but regulators cast the company a legal lifeline to devise solutions and implement them instead of facing a potentially long and costly competition case.

Joaquín Almunia, the competition commissioner with the European Commission, announced in a statement Monday that Google has the opportunity to remedy four areas in which its business practices “may be considered as abuses of dominance.”

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Those concerns include charges that Google favors its own services in search results, drawing from third-party sources to populate some of its offerings and potentially hurting competitors in the ad market through the way it manages its own advertising programs.

On one hand, Almunia’s move Monday spares Google — for now — from a statement of objections, the preliminary document that would have started the EU’s formal antitrust process.

Yet Almunia made clear Google must “come up in a matter of weeks with first proposals of remedies to address each of these points.” Those solutions would have to be market-tested, Almunia said. And he explained it would ultimately lead to a commitment decision, rather than a formal antitrust proceeding that could end with steep fines.

“I believe that these fast-moving markets would particularly benefit from a quick resolution of the competition issues identified,” said Almunia, who noted he delivered his concerns in a letter to Google Executive Chairman Eric Schmidt. “Restoring competition swiftly to the benefit of users at an early stage is always preferable to lengthy proceedings, although these sometimes become indispensable to competition enforcement.”

Replying to the EU’s preliminary findings, a Google representative said Monday that the company “disagree[s] with the conclusions but we’re happy to discuss any concerns they might have.”

“Competition on the Web has increased dramatically in the last two years since the commission started looking at this, and the competitive pressures Google faces are tremendous. Innovation online has never been greater,” the representative said.

Europe opened a competition probe against Google in November 2010, and since then has fielded complaints from a wide variety of rivals that believe the Mountain View, Calif.-based company is abusing its dominance in search and advertising. A similar probe is under way by the Federal Trade Commission here in Washington.

In Europe, Almunia set forth four key areas in which Google had potentially wielded dominance to the detriment of rivals.

The region’s regulators raised alarms that Google had prioritized its own vertical search services “differently than it does for links to competitors” and in some cases “may be copying original material from the websites of its competitors such as user reviews and using that material on its own sites without their prior authorization.” A number of companies had levied that charge at Google, which faced criticism for its approach to search at a hearing on Capitol Hill last year.

Moreover, Europe expressed concern that Google’s agreements with websites that provide search advertisements — those ads displayed next to results — “result in de facto exclusivity requiring them to obtain all or most of their requirements of search advertisements from Google.”

And the commission specifically raised fears about the company’s use of AdWords, which European regulators said may permit Google to impose “contractual restrictions on software developers which prevent them from offering tools that allow the seamless transfer of search advertising campaigns across AdWords and other platforms for search advertising.”

Google must now devise a remedies package or face threat of a brutal antitrust probe across the Atlantic.

“Should this process fail to deliver a satisfactory set of remedies, the ongoing formal proceedings will of course continue, including the possible sending of a statement of objections,” Almunia said.

After learning news of Europe’s move, a number of Google’s critics immediately praised the decision.

Thomas Vinje, EU counsel for FairSearch.org, said the “investigation has validated the concern that FairSearch members and many other businesses and consumer advocates have raised about Google’s practices that distort the free market and deprive consumers of the transparency and real choice that only results from competitive markets.” FairSearch represents a number of companies that have complained formally to the EU, including Microsoft and Expedia.

Foundem, another company that complained about Google’s business practices, welcomed the announcement Monday and reiterated its complaint to European authorities that Google “systematically manipulates its ostensibly neutral search results to promote its own services.”